Korea to Probe Gas Stations for Price Collusion Amid War-Driven Surge

The Korean government will investigate abnormal pricing practices at gas stations as domestic gasoline prices hit their highest level in approximately two years and five months amid the fallout from tensions between the U.S., Israel, and Iran. Regional gas stations suspected of colluding under the pretext of surging international oil prices are expected to be primary targets.

According to relevant government ministries on the 4th, the Fair Trade Commission, Ministry of Trade, Industry and Energy, and Ministry of Economy and Finance are reviewing market enforcement measures to prevent sharp oil price increases by domestic gas stations and refiners. The government previously activated a cross-ministry oil market inspection team in October 2023 during the Israel-Hamas armed conflict and major oil-producing nations' production cuts, and now plans to strengthen such market surveillance measures.

According to Opinet, the Korea National Oil Corporation's oil price information system, the average price of regular gasoline at gas stations nationwide surged 54.48 won (3.16%) from the previous day to 1,777.52 won per liter as of 4 p.m. that day. This marks the first time gasoline prices have exceeded 1,770 won since October 2023, approximately two years and five months ago. The average gasoline price in Seoul reached 1,843 won. Other major regions also approached 1,800 won, including Sejong at 1,793 won, Daejeon at 1,790 won, and Incheon at 1,786 won.

The problem is that domestic gasoline prices, which are linked to international oil prices, rise quickly but fall slowly. International oil prices typically take two weeks to be reflected in the domestic market, but this time some companies hoarded supplies or preemptively raised prices upon hearing news of a potential Strait of Hormuz blockade. This marks the first time in the past decade that domestic gasoline prices have risen more than 2% in a single day. The average price of automotive diesel at gas stations nationwide also surged nearly 6%, from 1,634.62 won on the 3rd to 1,728.85 won as of 4 p.m. that day.

Consequently, consumer prices, which had stabilized at 2% for the first time in five months alongside calming domestic oil prices earlier this year, are now at increased risk of becoming unstable again. The higher an item's weighting, the greater its impact on the overall consumer price index (based on a total of 1,000), and gasoline and diesel carry high weightings of 24.1 and 16.3, respectively. In July 2022, when petroleum prices soared 35.2% year-over-year, domestic consumer prices surged 6.3%. Katharine Oh, Morgan Stanley's Chief Economist for Asia Korea and Taiwan, has estimated that a $10-per-barrel increase in international oil prices could raise Korea's consumer price inflation by approximately 0.6 percentage points.

Meanwhile, small transport businesses are also on high alert as fears grow that fuel prices may rise further. Sun, 70, who operates a personal delivery truck in Yongsan-gu, Seoul, said, "Commercial vehicles are directly hit by rising fuel prices. When fuel prices surge in a short period, we're in a position where we have to negotiate with customers for even 10,000 won more."

Lines of vehicles seeking cheaper gas stations have also continued to form. Choi, 66, an employee at a self-service gas station in Guro-gu, Seoul, said on the 3rd, "Since the war broke out in Iran, the daily average number of refueling vehicles has increased by more than 20, and long waiting lines have become more frequent. Customers who used to fill up only 70% now fill their tanks to 100%."

The deep-sea fishing and shipping industries, which operate large vessels, are also closely monitoring rising fuel costs. An official from a deep-sea fishing company said, "When international oil prices rise, it affects not only operating costs but also domestic logistics costs in overlapping ways. On top of that, the exchange rate is also working against us." A shipping industry official said, "The Strait of Hormuz is an area where oil-producing countries that are destinations themselves are concentrated, making maritime detours difficult. With rising tanker freight rates and surging oil prices overlapping, the impact on company performance remains highly uncertain."